Some industry sources, however, report that in view of the heavy consumption demands that will be made in the near future, our total domestic reserves will not last more than 11 years.

Prospects for discovering additional domestic reserves of fluorspar are extremely remote, a statement that is supported by the fact that industry and government together, since 1941, have spent $2 million in the Kentucky fluorspar area alone, drilling and exploring for additional deposits, with discouraging and negligible results.

These explorations, which yielded little or nothing, become particularly significant when we consider that they were made in an area which is the chief source of domestic acid-grade production.

In 1957, Dr. Joseph L. Gillson, chief geologist of Du Pont, said in a speech:

**

*** The present consumption of about 550,000 tons of fluorspar of all grades in this country is expected to grow to 1 million tons by 1965 and probably * In my opinion, it is not the producers who should be worrying about whether they are going to sell their fluorspar, but rather the consumers as to where they will obtain their supplies.

sooner.

Walter E. Siebert, president of the St. Lawrence Fluorspar Co., testified during the 1958 hearings on the minerals subsidy bill:

I believe if your curve of increase in consumption of fluorspar keeps up at the rate it has been going over the last 5 years that there may be a world shortage of fluorspar.

The President's Materials Policy Commission (the Paley Commission) report said in 1950:

The growing demand for aluminum, plastics, steel, and other fluorspar-using products in the United States can, by 1975, be expected to increase the demand for fluorspar to nearly three times the 1950 consumption.1

To repeat, as the statistics indicate, we are presently dependent upon imports of fluorspar. The attempt to find additional reserves of fluorspar within this country have been unavailing.

It becomes very important that we do nothing to discourage the efforts in friendly countries to produce fluorspar and to find additional reserves. If we limit imports through the proposed quota system, we will curtail the operations of existing foreign mines and will also discourage further exploration and development of mines whose output will be very valuable to us in the future.

THE BILL IS A WINDFALL

If S. 1285 becomes law, the chief beneficiary will be one domestic company. As I have previously stated, the demand for acid-grade fluorspar is rising rapidly today and will continue to rise.

Approximately 60 percent of our domestic acid-grade production is captive; that is, the companies which mine it use it themselves. It is not sold on the open market. Of the remaining 40 percent, well over two-thirds is produced by one domestic concern.

This bill would allocate 200,000 tons of acid-grade fluorspar to the domestic producers. It is well known that the mines in the IllinoisKentucky area cannot supply this fluorspar. Consequently, mines in Colorado, now excluded from the domestic consuming market because of prohibitive transportation and other high costs, must be reopened to attain the domestic quota.

1 Consumption in 1950 approximated 426,000 tons.

These Colorado mines are owned by the domestic producer to whom I have already referred.

The freight from North Gate, Colo., to Cleveland, Ohio, on fluorspar is $21.92 a ton, which, translated into terms of hydrofluoric acid, amounts to $50.42 a ton.

The North Gate plant was built in 1952 by this largest U.S. producer under a certificate of necessity and in addition received a Government contract to put fluorspar in the national stockpile at relatively high prices. Upon expiration of the stockpile agreement, the plant was closed.

To my knowledge, very little fluorspar from this plant ever entered the commercial market because of the high production and transportation costs. There is reason to believe that the company already has amortized the North Gate plant.

The principal result then of the passage of S. 1285 would be a windfall for one company or, to state it another way, special legislation for the benefit of a single concern and not for the domestic industry as a whole.

CONTRARY TO NATIONAL SECURITY

On October 20, 1955, the domestic producers of acid-grade fluorspar asked the U.S. Tariff Commission to invoke the escape clause provisions of the Trade Agreements Act against imports. They sought higher tariffs or other restrictions. Their request was rejected.

At present there is pending before the Office of Civil and Defense Mobilization a petition of the American Fluorspar Producers Association for the limitation of fluorspar imports in the interests of national security.

Arguments have been made that the passage of S. 1285 is in the interests of national security.

Any action which limits imports of fluorspar definitely is not in the interests of national security because it would accelerate the depletion of domestic fluorspar.

Reserves which are vital, if we accept the arguments of the sponsors of this bill, would be depleted. The depletion of these reserves would increase, not decrease, the dependence of the United States upon imports.

If it is deemed desirable to maintain high-cost mines in readiness to produce if and when a crisis arises, this could be done for a small fraction of what this bill would cost the consumers. If it is deemed desirable to stimulate the search for domestic fluorspar reserves, this also can be done for a fraction of the cost of S. 1285 and could be accomplished under existing executive authority.

The argument has been made that operation of the domestic mines at comparatively high levels of activity is necessary in order to preserve mining skills. Otherwise, we are told, it will be very difficult to expand fluorspar production in the event of an emergency, since the miners will not be available. This is contrary to the experience during World War II, when companies which wished to increase production found that other miners, familiar with the type of mining involved in fluorspar operations, quickly learned fluorspar techniques.

Summing up, any limitation of acid-grade fluorspar imports would have the effect of hastening the depletion of the limited deposits in

the United States, thus leaving the industry dependent on foreign sources of supply.

It would seem the part of wisdom then to conserve our own supplies against the time when most foreign fluorspar might not be available. Fortunately, the reserves in Mexico are very great, and since these travel overland routes to the border, they could be drawn upon if war came, as would Canadian supply sources.

Fluorspar imports are actually strengthening, rather than threatening the national security.

S. 1285 WOULD INCREASE COSTS

An effort has been made to indicate that passage of this bill would not be a drain upon the Treasury or our economy. It is true that S. 1285 does not call for payments directly from the Treasury, but undoubtedly an increase in the market costs of fluorspar means increased prices for the products made from fluorspar. With the threat of inflation very formidable, anything which raises the costs to the ultimate consumer must be looked upon with trepidation.

In a letter to Leo A. Hoegh, Director of the Office of Civil and Defense Mobilization, dated January 2, 1959, Mr. John W. Iliff, manager of the fluorides division of the Harshal Chemical Co., of Cleveland, said:

The cost of fluorspar is the largest single element of our cost.

He continued:

Proponents for import restrictions have stated consumers can readily absorb the resultant cost increases. This is not so.

Historically, and for long periods of time, cost increases of the sort caused by unnecessary freights or by restriction on supply would be greater than our total operating profit on hydrofluoric acid and fluorides.

Our own experience and conclusions parallel those of the Cleveland company.

FOREIGN RELATIONS AND PRECEDENT

We do not have to belabor the point that the imposition of a fluorspar quota system would cause ill will among the nations now exporting the product to us. Among these are Mexico, Spain, Italy, and Canada. They would view this step as an indication of the growth of protectionist sentiment in the United States and as an ominous omen for the future of trade.

The pending bill is patterned along the line of the Sugar Act, but there are significant differences in the sugar situation and the fluorspar situation.

When the Sugar Act was first passed in the 1930's, the world sugar industry had been demoralized for years because of tremendous surpluses and low prices. There was no rise in consumption as is the case with fluorspar. Without relief, the depression among sugar producers would have continued indefinitely.

Also, the channels of sugar distribution were well established and the producing areas were well defined. The problem of domestic allocation, which in our opinion would be almost insuperable where fluorspar is concerned, was comparatively simple in the case of sugar. Incidentally, there is no formula for the allocation of domestic fluorspar production in this measure.

Nor did the question of unwarranted interference with foreign trade figure seriously in the discussions leading to the original Sugar Act. Most of the principals concerned felt that the legislation would exercise a stabilizing influence on prices and production and would be in the interests of all the areas supplying the domestic market.

As matters now stand, the President, after appropriate investigations, can raise tariffs or impose quotas where necessary to provide relief for domestic industries injured by imports.

A procedure for restrictions on imports which threaten national security also is outlined in the Trade Agreements Act of 1958. As I have already stated, the American Fluorspar Producers Association has such a petition pending now before the OCDM. As Secretary of the Interior, Fred A. Seaton, pointed out in his adverse report on S. 1285:

Should a determination be made that imports of fluorspar threaten to impair the national security, there is ample authority to adjust the imports to remedy the situation. Hence no further legislative authority is required to limit imports.

The passage of S. 1285 would take discretionary authority from the hands of the President and impose quotas for one commodity by specific legislation.

Once this precedent is established, it is almost certain that the same formula would be followed for other products which are seeking relief from import competition. The effect abroad of the passage of legislation of this extreme type, with so little justification, would be profound. It would be interpreted as a repudiation of the policies which have stimulated trade among the free world countries to tremendous proportions. The results could well be disastrous.

We have not tried in this presentation to analyze the bill in detail. Might I comment, however, that there are phrases and paragraphs that are very difficult for us, who are in the flourspar business, to understand.

For example, section 5(e) permits the Secretary of the Interior to deduct imports of "fluorine or fluorine compounds" from permissible imports of acid grade flourspar "in such manner as the Secretary shall determine."

The phrase "fluorine compounds" is so indefinite that compounds such as natural cryolite and fluosilicates derived from phosphate rock could be included within its scope. Moreover, no standards are set up in the bill by which the Secretary may make the determinations he is required to make under this section.

In conclusion, let me emphasize that the group I represent is unanimous in feeling that this is a bad bill, and we request your help in defeating it.

The CHAIRMAN. Thank you very much for your statement.
Any questions, Senator Allott?

Senator ALLOTT. Mr. Mitchell, will you tell me first of all what the Nyotex Chemicals Division of the Stauffer Chemical Co. produces? Mr. MITCHELL. Yes, sir.

We produce from fluorspar hydrofluoric acid and anhydrous aluminum fluoride.

Senator ALLOTT. Where is anhydrous aluminum fluoride used?
Mr. MITCHELL. It is consumed by the aluminum industry.

Senator ALLOTT. Now, in order that we can identify your interest with this, it is a fact that your association which you represent here today was organized for the specific purpose of defeating this bill; is that correct?

Mr. MITCHELL. Well it certainly had-that was one of the objectives, Senator; yes, sir.

Senator ALLOTT. Would you say that it was not?
Mr. MITCHELL. Was not the objective?

Senator ALLOTT. Yes.

Mr. MITCHELL. I said it was one of its objectives.
Senator ALLOTT. When was it organized?

Mr. MITCHELL. Recently in the past month or so.

Senator ALLOTT. You have alleged in your statement-and it is a fine statement-you have alleged in your statement that it is a subsidy.

Now here is a copy of 1285. Will you show me any place in this bill where there is any subsidy paid or proposed to be paid to anybody?

Mr. MITCHELL. Well, Senator, it may not be a direct subsidy. But as a result of the higher prices that the domestic consuming fluorspar industry would have to pay, it would sooner or later add to inflation and certainly could well result in subsidies.

Senator ALLOTT. Well then it is not a subsidy as the word "subsidy" is properly used, is it?

Mr. MITCHELL. Well, without further carefully reviewing S. 1285 I don't know that I could answer your question, sir, or say that it

was not.

Senator ALLOTT. Are you acquainted with the legislation that was before this committee last year relative to lead-zinc, fluorspar?

Mr. MITCHELL. Yes, sir; I have followed it so far as fluorspar was concerned.

Senator ALLOTT. That was a subsidy bill.

Mr. MITCHELL. I think it was. I think that was where it involved the payment to the domestic producers of, as I recall, up to $15 a ton in order to meet

Senator ALLOTT. Directly from the Treasury, would it not?
Mr. MITCHELL. I think that is correct; yes,

sir.

Senator ALLOTT. So that is a subsidy, is it not?

Mr. MITCHELL. There is no question about that in my mind. Senator ALLOTT. You are acquainted with the fact that the Government of the United States through the CAB pays to certain air carriers certain amounts to keep those air carriers in business. Is that a subsidy?

Mr. MITCHELL. That is what we always call it.

Senator ALLOTT. And it is a direct payment, is it not?

Mr. MITCHELL. Yes, sir; that is my understanding.

Senator ALLOTT. It is a subsidy?

Mr. MITCHELL. Yes, sir.

Senator ALLOTT. Now, do you find anything in that bill calling for any payment by the Government directly or indirectly to the producers of fluorspar in this country?

Mr. MITCHELL. No; I don't think there is, sir.